Mussalman ki itni badhiya izzat Hindustan main aur kahin nahin hai (Nowhere else in India are Muslims as well-respected as they are in Hyderabad), says the editor of an English daily newspaper in Hyderabad, referring to the history of social and community equilibrium between Hindus and Muslims in the city.

As is well-known, the Muslim community of Hyderabad has a distinct regional identity with their food, dress, aesthetic sense and even dialect, Dakkani (of the Deccan), quite different from other Muslims of India. But the twin bomb blasts of August 25 that killed 40 people has shaken up the status quo in Hyderabadi minds.

The police have, without giving any evidence, predictably blamed the Harkut-ul-Jehad-al Islami and other terrorist outfits for the terrorism.

On Monday, people by and large supported the Bharatiya Janata Party-sponsored bandh because they wanted to express their concern over the blasts.

Reliance [Get Quote] Fresh, Wills Lifestyle, the Hyderabad Mall, the Wrangler factory outlet, the Pantaloons mall etc, numerous gold jewelry shops and information technology hubs, which are the symbols of a new and rich Hyderabad, stayed shut on Monday.

At the three hour-long futile all-party peace meeting, politicians including Chief Minister Y S Rajasekhar Reddy had an easy explanation for the recent blasts: Since Hyderabad is one of the fastest growing Indian cities after the four metropolises, the blasts occurred to arrest its growth.

But many people do not buy this one-dimensional explanation.

The overwhelming, culturally well-set and tradition-oriented Muslim community of the Old City is being used as a cover by anti-national elements with links to Pakistan-based or Bangladesh-based fundamentalist, terrorist groups. This perception, which is probably real, is the most uncomforting aspect of the blasts.

For the last five to seven years the intelligence community has been discussing Hyderabad and its terror links.

There are many unnerving perceptions and facts in a changing Hyderabad which carries in itself the story of liberalisation and globalisation of just one tiny section of India which is not able to, and sometimes not inclined to, take along the backward neighbourhood.

Hyderabad is an apt symbol of selective growth in new India that has and enjoys the advantages of liberalisation. In view of the blasts, these debates have become relevant.

Here, in the minds of many of the young generation, the Old City of Hyderabad is the dark place where liberalisation or modernity has not reached, and is not allowed to reach by vested interests.

In old Hyderabad Muslims number around 70 per cent of the population; in new Hyderabad they constitute 30 per cent.

After the real estate boom the divide between the two cities has widened so much that it has gone beyond the control of political and social leaders.

After the attack on the Akshardham temple in Gandhinagar in September 2002, Gujarat minister Haren Pandya's murder in March 2003 and the attack on the Samjhauta Express in February this year, investigators discovered the deadly plots had linkages to the Old City of Hyderabad.

As the new Hyderabad demonstrated its business sense and pushed the IT revolution and biotech hubs, on other side of the city things moved in a negative direction.

V Hanumantha Rao, a Congress member of the Rajya Sabha, says, "Fundamentalism has increased in certain sections. But other problems can't be ignored. What do you do when land that cost Rs 100 per square yard now fetches Rs 40,000 per sq yard? NRIs are pouring in money, IT and other sectors are changing the profile of the city. The part which is not getting the fruits of the boom is succumbing to extremism."

The police investigation into cases relating to activities of Pakistan's Inter Services Intelligence agency was itself shoddy, but the fact was that when arrests were made the local community resorted to violence, and when people with links to Pakistan were arrested they were released under political pressure.

The Congress and the Majlis-e-Itehadul Muslimeen were partners out of political expediency. Before them, then chief minister N Chandrababu Naidu [Images] was not far behind; the Muslim vote bank tied his hands, too.

The growing presence of fundamentalism in the city and the changing perception of Hindus and Muslims about each other did not make any impact till the blasts at the Mecca Masjid in May and the twin blasts in and around the area where these dangerous elements were supposedly hiding. Rather, many observers thought the jihadis would not plant bombs in the geographical area where they were hiding since it would lead to an increased police vigil but the turbulence within society has taken place without mercy.

Saturday's blasts are deeply disturbing because it challenges the city's culture and also the modern Telugus who have the advantages of economic liberalisation and globalisation.

The dangerous political opportunism of the Congress and MIM are widely blamed here for the degeneration in the communal equation.

The Telugu Desam Party, BJP and Communist Party of India-Marxist also have a political stake in the volatile communal situation.

The most peculiar feature that has emerged here in recent years is the political conflict between the MIM and CPI-M.

The MIM is a right-of-centre party. Decades ago it had complete sway over Muslim minds in the Old City. It controls education institutions, hospitals and real estate. Slowly, the Owaisi family, that had an autocratic grip over the MIM and over the flow of power and resources, began to be conceived as leaders of "rich Hyderabadi Muslims". The MIM is said to have contributed hugely in creating a class divide within the Muslims of Old City.

Some poor Muslims did not get medical treatment or school admissions in their community institutions because powerful community leaders served the interests of upper class Muslims. For the last few years, the Communists have started penetrating the lanes and bylanes of the Old City and serve the poor Muslim colonies.

Herein lies the reason for the recently accentuated MIM fundamentalism. As they saw their clout over their fiefdom dissipate, the Owaisi family resorted to religious-political fundamentalism. The recent attack on Bangladeshi writer Taslima Nasreen is seen as an attempt by the party to win back its popularity among poor and middle class Muslims.

S P Sudhakar Reddy, a legislator and teacher, told rediff.com, "The MIM has turned into a party of elite Muslims, helping them get education and the best facilities. The CPI-M has captured the areas left behind by them."

Two days after the terrifying blasts Ramkoti, a rickshaw puller, told this correspondent, "Don't blame the Muslims. Hindu-Muslim tensions increase when the Congress is in power. Do you remember the rule of Congress chief minister Chenna Reddy (1978 to 1980)? We have seen communal riots."

A man with a tilak on his head and a devotee of Hanuman [Images], Ramkoti goes to the Old City, drops his passengers, eats non-vegetarian food and is not afraid of Hyderabadi Muslims.

The fast-track development in one part of Hyderabad wowed then US President Bill Clinton during his visit in March 2000, while even today the Old City that Ramkoti refers to has remained untouched by the liberalised economy and by the ethos that drives the youth of India.

For the last three years security became a big issue, but the people were not ready nor were the police.

Soon after the blasts Chief Minister Reddy declared, 'the state government will definitely not have the wherewithal to go into this sort of intelligence operations'. His confidant, minister Mohmmad Ali Shabbir, told rediff.com, "What do you expect us to do? Do you want us to keep vigil on all the chaat-eating people?"

He was referring to Saturday's blast at the Gokul Chat House, which killed over 20 people.

He stoutly denied that the Congress was soft-peddling the issue of terrorism. "If we can kill Naxalism what stops the same policemen from hitting out at terrorism?" he asked.

Asked what stopped the police from handling terrorism with a firm hand, he said, "We can't do anything against the international terrorist network. We can't keep the police in each house. How many chaatwallahs can we guard?"

He blamed the television channels who repeat the coverage of terrorism-related incidents. "TV channels create more tension. At the Gokul Chat House 50 per cent of the people who died were Muslims."

It was shocking to hear a Congress politician's words at the peace meeting at Ravindra Bhavan: "Have you seen the secular list of victims?" He was brazenly referring to the fact that Muslims had died along with Hindus in the blasts, and probably feeling smug that this fact would prevent riots in Hyderabad.